Pricing Strategy Review Increasing Profitability

Situation

Our company analyzed an unusual pastry product with great taste and mouthfeel.  The quality of the product was not a contributing factor the "loss" they experienced with each sale they shipped. They were on the verge of closing the non-profitable business.

Problem

Since the product quality and repeat sales were good we decide to look at their costs and pricing.  We discovered that the pricing was arrived at by the entrepreneur's "flip of the coin". The owner/entrepreneur had NO idea of actual costs, acceptable margins or competitive pricing.

Solution

Our company applied cost accounting principles to establish a realistic and profitable wholesale/ retail sale price of the pastry.  This meant including ALL costs associated with the product's production; ingredients, packaging, labor, kitchen rental, utilities and other costs included in the production and sale of the pastry product.   We employed competitive analysis along with cost information to establish a profitable cost per each as well as a bulk sales price.

Benefits

We introduced product pricing based on complete and actual costs.  By using this approach we provided the correct wholesale/retail price for the company to charge which resulted in profitable sales growth going forward.  This factual cost analysis and implementation of accurate product costing resulted in profitable pricing which ultimately kept the company operating.

For additional information contact Joy C. Shefter at joy@miljoyent.com.